IRNS Ironstone Group Inc (CE)

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

☒	ANNUAL REPORT UNDER SECTION 13 OR 15(d ) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

 

 

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-12346

 

IRONSTONE GROUP, INC.

(Name of Registrant as specified in its charter)

 

Delaware	95-2829956
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

 

909 Montgomery Street, San Francisco, California 94133

(Address of principal executive offices, including zip code)

 

(415) 551-8600

(Registrant’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Exchange Act:

None

 

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.01 par value

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ]    No [X]

 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ]    No [X]

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]    No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and no disclosure will be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Act.

       Large accelerated filer [  ]      Accelerated filer [  ]      Non- accelerated filer [  ]      Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [  ]    No [X]

 

The approximate aggregate market value of voting stock held by non-affiliates of the Registrant was $974,964 as of December 31, 2014 based on the closing bid price on December 31, 2014. Shares of voting stock held by each officer and director and by each person who owns 5% or more of the outstanding voting stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive.

 

Check whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [  ] No [X]

 

As of March 25, 2015, 2,191,689 shares of Common Stock, $0.01 par value, were outstanding.

  

  

TABLE OF CONTENTS

 

 

PART I:		Page
Item 1.	Business		3
Item 1A.	Risk Factors		3
Item 1B.	Unresolved Staff Comments		3
Item 2.	Properties		3
Item 3.	Legal Proceedings		3
Item 4.	Mine Safety Disclosures		3
PART II:
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		4
Item 6	Selected Consolidated Financial Data		5
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		5 - 7
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		7
Item 8.	Financial Statements and Supplementary Data		7 - 22
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		23
Item 9A	Controls and Procedures		23
Item 9B.	Other Information		24
PART III:
Item 10.	Directors and Executive Officers and Corporate Governance		24
Item 11.	Executive Compensation		25
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		28
Item 13.	Certain Relationships, Related Transactions, and Director Independence		29
Item 14.	Principal Accountant Fees and Services		29
PART IV:
Item 15.	Exhibits, Financial Statement Schedules		29
SIGNATURES			30

 

 

PART I

 

ITEM 1. BUSINESS

 

BACKGROUND

 

Ironstone Group, Inc, (“Ironstone” or the “Company”) a Delaware corporation, was incorporated in 1972. Since 1986, a majority of Ironstone’s outstanding shares has been owned by Hambrecht & Quist Group, a San Francisco-based investment banking and venture capital firm, and its affiliates (collectively “H&Q”). In September 2003, Ironstone repurchased all of these shares. Such repurchased shares are currently being held as treasury stock. William R. Hambrecht, Director and Chief Executive Officer, owns approximately 61.07% of Ironstone’s outstanding voting shares as of December 31, 2014.

 

 

BUSINESS STRATEGY

 

Currently, the Company is reviewing options and new business opportunities. At December 31, 2014, the Company had $312,287 in marketable securities, $25,817 in cash, and $2,674,677 in non-marketable investments, and $885,000 in tax loss carry-forwards at its disposal. The Company's gross net operating loss carry forwards for federal and state purposes totaled to $2,428,094 and $1,196,195 as of December 31, 2014, respectively.

 

There can be no assurance that the Company will acquire businesses, form additional alliances, or expand its existing services. Failure to expand the scope of services provided by the Company may have an adverse effect on the Company’s results of operations.

 

 

EMPLOYEES

 

As of December 31, 2014, the Company had five part-time employees. The employees received no cash compensation for the years ended December 31, 2014 and 2013, and are not subject to a collective bargaining agreement.

 

 

ITEM 1A. RISK FACTORS

 

The Company’s main assets are investments in non-marketable securities of TangoMe Inc., Arcimoto Inc. and marketable securities of Salon Media Group Inc., Truett-Hurst Inc., and FlexiInternational Software Inc. There can be no assurance that a market will continue to exist for these investments.

 

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

 

ITEM 2. PROPERTIES

 

The Company’s principal executive offices are located at 909 Montgomery Street, San Francisco, California 94133, in office space leased by its Chief Executive Officer.

 

 

ITEM 3. LEGAL PROCEEDINGS

 

None.

 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

PART II

 

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

 

Our common stock trades on the OTC Markets under the trading symbol IRNS. The table below sets forth, for the fiscal quarters indicated, the reported high and low sale prices of our common stock, as reported by the OTC Markets. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Also, due to the very limited and sporadic nature of trading in our common stock, we believe there is not an established public trading market in our common stock, and there can be no assurance that such a trading market will develop. The following table sets forth the range of high and low closing sale prices for our common stock for each period indicated:

 

2013		High				Low
Quarter 1		$	0.48			$	0.20
Quarter 2			1.23				0.48
Quarter 3			1.20				0.55
Quarter 4			3.00				0.55

 

2014		High				Low
Quarter 1		$	7.10			$	3.00
Quarter 2			5.75				2.00
Quarter 3			6.99				3.90
Quarter 4			6.99				2.50

 

Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) impose sales practice and disclosure requirements on certain brokers-dealers who engage in transactions involving a “penny stock.” The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. We believe that the penny stock rules may discourage investor interest in and limit the marketability of our common shares.

 

As of December 31, 2014, there were approximately 500 holders of record of the Company’s common stock. The Company has not paid cash dividends on its common stock since its inception and does not intend to pay cash dividends on its common stock in the foreseeable future.

 

On January 30, 2013 the Company granted 70,000 stock options to directors and officers of the Company. On August 20, 2013, the Company granted an additional 100,000 stock options to an employee of the Company. The option grants were intended as compensation for services provided to the Company. The options will vest over four years and have a 10 year term. The exercise price of the stock options granted in January 2013 is $0.20 per share and for those granted in August 2013 is $1.20 per share. The stock options were issued in reliance on the exception from registration provided by Section 4(a) (2) of the Securities Act of 1933.

  

 

Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

 

Year ended December 31		2014				2013
Net revenues		$	-			$	-
Net loss		$	258,753			$	169,747
Unrealized gain (loss)		$	(72,220	)		$	1,830,518
Comprehensive gain (loss)		$	(330,973	)		$	1,660,771
Cash		$	25,817			$	242,443
Marketable securities		$	312,287			$	957,252
Non-marketable securities		$	2,674,677			$	2,001,919
Total assets		$	3,012,781			$	3,201,614

 

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION

 

CRITICAL ACCOUNTING POLICIES

 

While the Company continues to evaluate business opportunities, its sole source of revenue is from the sale of marketable and non-marketable securities. Management has classified these securities as available for sale in accordance with ASC Topic 320, “Investments – Debt and Equity Securities.” These securities are recorded at fair value, and any unrealized gains and losses are reported as other comprehensive income. For securities for which there is an other-than-temporary impairment, an impairment loss is recognized as a realized loss.

 

Ironstone’s primary expenses are generated from maintaining regulatory reporting compliance, such as quarterly review and annual audit of the financial statements, seeking legal counsel when appropriate, and consulting fees.

 

Fair Value Measurements

 

The accounting principles general accepted in the United States of America (“GAAP”) defines fair value, establishes a framework that the Company uses to measure fair value and provides for certain disclosures about the fair value measurements included in the Company's financial statements. Refer to Note 2 in the Notes to Financial Statements for these disclosures. Fair value is defined by GAAP as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants on the measurement date.

 

 

In determining fair value, the Company uses various valuation approaches. GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company’s management. Unobservable inputs are inputs that reflect management’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

 

Level 1–Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

 

Level 2–Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

Level 3–Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the management in determining fair value is greatest for instruments categorized in Level 3.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that the Company believes market participants would use in pricing the asset or liability at the measurement date.

 

RESULTS OF OPERATIONS

 

Years ended December 31, 2014 and December 31, 2013

 

Operating expenses for 2014 totaled $122,809, an increase of $75,825 or 161.4% as compared to 2013. The increase was primarily due to an increase in professional fees of $32,116 and stock compensation expense of $17,678. Interest expense for fiscal year 2014 totaled $135,944, an increase of $13,181 or 10.7% as compared to fiscal year 2013, which is attributed to an increase in the Company's notes payable. Operating expenses for 2013 totaled $46,984, an increase of $1,689 or 3.7% as compared to 2012. The increase was primarily due to an increase in professional fees of $4,021, state taxes of $18,841, and stock compensation expense of $10,326. Interest expense for fiscal year 2013 totaled $122,763, an increase of $26,666 or 27.8% as compared to fiscal year 2012. The increase was due to an increase in borrowings.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Net cash used in operating activities was $116,616 and $164,434 for the years ended December 31, 2014 and 2013, respectively. The decrease over fiscal year 2013 is attributed to a decrease in cash used for accounts payable and accrued expenses. Net cash used in investing activities was $100,011 and $37,002 for the years ended December 31, 2014 and 2013, respectively. The increase is due to a investment made in non-marketable securities by the Company in fiscal year 2014. Net cash provided by financing activities was $1 and $440,501 for the years ended December 31, 2014 and 2013, respectively. The decrease in cash provided by financing activities is due less cash needed from financing activities to support investing activities in fiscal year 2014 compared to fiscal year 2013.

 

The Company has a line of credit arrangement with First Republic Bank with a borrowing limit of $350,000 with interest based upon the lender’s prime rate plus 4.5%. Interest is payable monthly at 7.75%. The line is guaranteed by William R. Hambrecht, Chief Executive Officer, Director and Robert H. Hambrecht, Director. The line of credit is due on demand and is secured by all of the Company’s business assets. At December 31, 2014, the outstanding balance under the line was $350,000.

 

At December 31, 2014, the outstanding balance the Company borrowed from related party Mr. William R. Hambrecht was $182,000 with interest at 7.75% per annum. Additionally, the Company has a note payable due to an unrelated party of $1,208,416 as of December 31, 2014. The note payable due to the unrelated third party includes loan principle of $1,000,000 and pay-in-kind interest of $243,710, offset by discount of $35,294 relating to warrants issued in connection with the note.

  

 

The Company may obtain additional equity or working capital through additional bank borrowings and public or private sales of equity securities and exercises of outstanding stock options. The Company may also borrow additional funds from Mr. William R. Hambrecht. There can be no assurance, however, that such additional financing will be available on terms favorable to the Company, or at all.

 

While the Company explores new business opportunities, the primary capital resource of the Company relates to the March 30, 2012 purchase of 468,121 shares of non-marketable investment TangoMe, Inc. The investment in TangoMe, Inc. shares is valued at $2,574,666 and $2,001,919 for the years ended December 31, 2014 and 2013, respectively, For the year ended December 31, 2014, the Company recorded an unrealized gain of $572,746 on the investment. Given that the investment in TangoMe, Inc. does not have a readily determinable fair value, the Company exerts significant judgment in estimating the fair value using various pricing models and the information available to the Company that it deems most relevant.

 

Another capital resource of the Company is 1,926,857 shares of Common Stock of Salon Media Group, Inc. These shares resulted from the April 24, 2013 exchange of 843 shares of Series C Preferred Stock of Salon Media Group Inc. The investment in common shares of Salon is valued at $250,491 and $867,086 at December 31, 2014 and December 31, 2013 respectively. For the year ended December 31, 2014 the company recorded a related unrealized loss of $616,595 on the investment.

 

Additionally, in conjunction with making the investment in Salon Media Group, Inc., the Company received warrants to purchase common stock in Salon. In 2006, the Company exercised its warrants to purchase a total of 79,970 shares of common stock of Salon. This investment in common shares of Salon is valued at $10,396 and $35,987 as of December 31, 2014 and December 31, 2013, respectively. For the year ended December 31, 2014, the Company recorded an unrealized loss of $25,591 on the investment.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	Page
Reports of Independent Registered Public Accounting Firms	8
Consolidated balance sheets at December 31, 2014 and 2013	9
Consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2014 and 2013	10
Consolidated statements of stockholders’ equity for the years ended December 31, 2014 and 2013	11
Consolidated statements of cash flows for the years ended December 31, 2014 and 2013	12
Notes to consolidated Financial Statements	13

  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  

 

To the Board of Directors and
Stockholders of Ironstone Group, Inc.

 

We have audited the accompanying consolidated balance sheets of Ironstone Group, Inc. and its subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2014. Ironstone Group, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ironstone Group, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has recurring net losses and negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ Burr Pilger Mayer, Inc.

San Francisco, California

April 15, 2015

 

 

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

 

 

The accompanying notes are an integral part of these consolidated financial statements

  

 

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

Years ended December 31,2014 and 2013

 

 

  

The accompanying notes are an integral part of these consolidated financial statements

  

 

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

  

 

IRONSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

IRONSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 

 

 

 

 

IRONSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

  

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15(e) as of December 31, 2014 in connection with the filing of this Annual Report on Form 10K. Based on that evaluation our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2014, in light of the material weakness described below, our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

 

Notwithstanding the material weakness, our Company’s financial statements in this Form 10K fairly present in all material respects, the financial condition, results of operations and cash flows of our company as of and for the periods presented in accordance with generally accepted accounting principles in the United States.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal controls over financial reporting for the three-months ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Management’s Report on Internal Controls over Financial Reporting

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

 

All internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Therefore, even effective internal control over financial reporting can provide only reasonable, and not absolute, assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal controls over financial reporting may vary over time.

 

Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making its assessment of internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our evaluation, management concluded that, as of December 31, 2014, our internal control over financial reporting was not effective based on those criteria because of the existence of the following material weaknesses:

 

1)

The Company does not have an adequate number of independent board members nor therefore an independent audit committee.

 

2)

Our limited number of employees results in the Company’s inability to have a sufficient segregation of duties within its accounting and financial reporting activities.

 

These absences constitute material weaknesses in the Company’s corporate governance structure.

 

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting because the Company is a smaller reporting company.

  

 

ITEM 9B. OTHER INFORMATION 

 

None.

 

 

PART III

 

ITEM 10. DIRECTORS, AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

DIRECTORS

 

Name	Age	Director Since
William R. Hambrecht	79	2007
Robert H. Hambrecht	48	2003
Denis T. Rice	82	2012
Elizabeth Hambrecht	51	2014
Thomas Thurston	37	2014

  

William R. Hambrecht is the Chairman and Co-Chief Executive Officer of WR Hambrecht + Co which he founded in January 1998.  He was co-founder of Hambrecht & Quist in 1968 where he held various executive management positions until he resigned in December 1997.  He holds a B.S. degree from Princeton University.

 

Robert H. Hambrecht was a founding partner of W.R. Hambrecht + Co., an investment banking firm, founded in January 1998.  From 1996 through January 1998, Mr. Hambrecht was Vice President of H&Q Venture Partners, a venture capital firm.  From 1994 to 1996, Mr. Hambrecht was employed by Unterberg Harris, an investment banking firm.  Mr. Hambrecht earned a master’s degree in public administration from Columbia University in 1993.

 

Denis T. Rice is Senior Counsel with the law firm of Arnold & Porter LLP in San Francisco, which combined in 2012 with the Howard Rice law firm of which Mr. Rice was a founding partner. The California State Bar bestowed its annual Lifetime Achievement Award in Business Law on Mr. Rice in 2009. He has an A.B. degree from the Woodrow Wilson School of Public and International Affairs at Princeton University.

 

Elizabeth Hambrecht is the CEO at Salon Media Group, which operates the popular Salon.com website. Before Salon, Elizabeth was a co-founder of Asiacontent.com, a pioneer in Asia’s Internet industry, and helped fund and launch Boom.com, Hong Kong’s first electronic brokerage. Prior to Boom.com, Elizabeth was an equities analyst covering emerging markets at Goldman Sachs (Hong Kong) and before that at Baring Securities. Elizabeth has served as a director of Salon Media Group, and as a Trustee of the San Francisco Friends School, the Asian Art Museum of SF and Northern California Public Broadcast (NCPB). She graduated with a B.A. degree from Vassar College and studied Mandarin at the Taipei Language Institute.

 

Thomas Thurston is CEO and Founder of Growth Science, a data science think-tank that uses algorithms to predict disruptive innovation. Formerly, he used data science to guide growth investments and innovation at Intel Corporation. He was Managing Partner at Rottura Capital, an algorithm-based long-short hedge fund. He also helped found a high performance computing business that was acquired in 2008. A former Fellow at Harvard Business School, Mr. Thurston holds a BA, MBA, and JD.

 

EXECUTIVE OFFICERS

 

The following table sets forth the names, ages and positions of the Company’s executive officers as of December 31, 2014. A summary of the background and experience of each of these individuals is set forth after the table.

 

Name	Age	Position	Held Since
William R. Hambrecht	79	Chief Executive Officer	2007
Eugene Yates	51	Chief Financial Officer	2014

 

Code of Ethics

 

The Company has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all of the Company’s employees (including its executive officers) and directors. The Company shall provide to any person without charge, upon request, a copy of the Code. Any such request must be made in writing to the Company, c/o William R. Hambrecht,

909 Montgomery Street, San Francisco, CA 94133.

 

 

PART III – (Continued)

 

ITEM 11. EXECUTIVE COMPENSATION

 

COMPENSATION OF DIRECTORS

 

Outside directors may also receive stock option grants under the Company’s 2013 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”). Only non-employee directors of the Company or an affiliate of such directors (as defined in the Internal Revenue Code of 1986, as amended from time to time, hereinafter the “Code”) are eligible to receive options under the Directors’ Plan. Options granted under the Directors’ Plan are not intended to qualify as incentive stock options under the Code.

 

Options under the Directors’ Plan have a ten-year term; however, each option will terminate prior to the expiration date if the optionee’s service as a non-employee director, or, subsequently, as an employee, of the Company terminates. The exercise price of each option under the Directors’ Plan must be equal to the fair market value of the Common Stock on the date of grant. All options issued pursuant to the Directors’ Plan vest at a rate of 1/48 per month for 48 months following the date of the grant of the option, or in the event the grant was delayed pending compliance by the Company with certain securities law requirements, the date from which the grant was delayed.

 

     The table below shows the compensation paid to the Company’s non employee directors during 2014.

 

Director Compensation

Name

Fees earned or

Option

paid in cash ($)

awards ($)

Total ($)

William R. Hambrecht

-

-

-

Robert H. Hambrecht

-

-

-

Denis T. Rice

-

-

-

Elizabeth Hambrecht

-

-

-

Thomas Thurston

-

-

-

 

(1)

See note 8 to the Company audited Consolidated Financial statements included in Item 8 to this report for a description of the assumption underlying the calculation of grant date fair value. The options have a term of ten years, however the optionee’s options will expire 90 days after the optionee’s service to the Company terminates. The option vest over a four-year period at the rate of 1/10 on the date six months after the date of grant and 1/48 per month thereafter. The exercise price of stock options may not be less than 100% of the fair market value of the Common Stock subject to the option on the date of the grant.

 

(2)

Mr Thurston was appointed as the Company’s Director effective January 1, 2014

 

(3)

Ms. Hambrecht was appointed as the Company’s Director effective September 12, 2014

  

 

PART III – (Continued)

 

COMPENSATION OF EXECUTIVE OFFICERS

 

SUMMARY OF COMPENSATION

 

 

The following table shows that, for the fiscal year ended December 31, 2014, no compensation was awarded or paid to, or earned by, the Company’s Chief Executive Officer or the Company’s Chief Financial Officer.

 

NAME AND PRINCIPAL POSITION	YEAR	SALARY ($)	BONUS	OPTION AWARDS	NON-EQUITY INCENTIVE PLAN	OTHER COMPENSATION ($)	TOTAL
William R. Hambrecht Chief Executive Officer	2014	--	--	-	--	-	--
Eugene Yates Chief Financial Officer (2)	2014	--	--	-	--	-	--

 

(1)

See note 8 to the Company audited Consolidated Financial statements included in Item 8 to this report for a description of the assumption underlying the calculation of grant date fair value. The options have a term of ten years, however the optionee’s options will expire 90 days after the optionee’s service to the Company terminates. The option vest over a four-year period at the rate of 1/10 on the date six months after the date of grant and 1/48 per month thereafter. The exercise price of stock options may not be less than 100% of the fair market value of the Common Stock subject to the option on the date of the grant.

 

(2)

Mr. Yates was appointed as the Company’s Chief Financial Officer effective September 12, 2014

  

PART III – (Continued)  

 

Outstanding Equity Awards at Fiscal Year-End

 

Option Awards

 

Name

Number of

Number of

Option

Option

securities

securities

exercise

expiration

unexercised

unexercised

price

date

options (#)

options (#)

exercicisable

unexercicisable

(a)

(b)

( c )

(e)

(f)

William R. Hambrecht

--

--

$

--

--

Eugene Yates

--

--

$

--

--

 

See the Summary Compensation Table for information regarding vesting.

 

Additional Equity Compensation Plan Information

 

The following table summarizes information regarding shares of common stock that may be issued upon exercise of stock options under the Company's 2013 Equity Incentive Plan as of December 31, 2014, which was the only plan or arrangement under which equity compensation was outstanding or could be awarded at that date.

 

Plan Category		A. Number of securities to be issued upon exercise of outstanding options, warrants, and rights				B. Weighted-average exercise price of outstanding options, warrants, and rights				C.Number of securities remaining available for future issuance inder equity compensation plans (excluding securities) reflectd in column A)
Equity compensation plans approved by stockholders			170,000			$	0.7882				17,296
Equity compensation plans or arragements not approved by stockholders			0
Total			170,000								17,296

  

 

PART III – (Continued)

 

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information regarding the ownership of the Company’s Common Stock as of March 31, 2015 by: (i) each director; (ii) each named executive officer; and (iii) all those known by the Company to be beneficial owners of more than five percent of its Common Stock.

 

BENEFICIAL OWNERSHIP (1)

 

 

BENEFICIAL OWNER		NUMBER OF SHARES OF COMMON STOCK				PERCENT TOTAL
William R. Hambrecht
909 Montgomery Street San Francisco, CA 94133			1,338,373				59.5
Elizabeth Hambrecht
909 Montgomery Street San Francisco, CA 94133			167,143				7.4
Robert Hambrecht
909 Montgomery Street San Francisco, CA 94133			16,429				*
Denis Rice
909 Montgomery Street San Francisco, CA 94133			7,500				*
Thomas Thurston
909 Montgomery Street San Francisco, CA 94133			140,714				6.3
Edmund H. Shea, Jr. (deceased and related entities)
655 Brea Canyon Road Walnut, CA 91789			113,173				5.0
Shea Ventures
655 Brea Canyon Road Walnut, CA 917			187,296				8.3
All executive officers and directors
As a group (7person)			1,970,628				87.6
*Less than 1 percent

 

(1)

This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G, if any, filed with the Securities and Exchange Commission (the “SEC”). Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

 

(2)	In Company Stock options exercisable currently or within 60 days after March 31, 2015, as follows: Ms. Hambrecht, 10,000 shares; Robert Hambrecht 5,000 shares; Mr. Rice 7,500 shares; and Mr. Thurston, 35,000 shares.

 

(3)	Applicable percentages are based on 2,249,189 shares outstanding on March 31, 2015.

  

 

PART III – (Continued)

 

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Mr. William R Hambrecht, Chief Executive Officer, is a shareholder in Salon Media Group, Inc. owning 22.6%.

 

On December 31, 2014 the Company combined all the various notes payable, which were issued at various times to Mr. William R. Hambrecht, to one note for $182,000 at 7.75% interest, with a December 31, 2015 maturity.

 

Prior to December 31, 2013, the Company received $230,000 from certain new investors and certain of its existing investors, including related parties, pursuant to a stock purchase agreement. Under the stock purchase agreement, 131,429 shares of Ironstone’s Common Stock was sold at a share price of $1.75 .

 

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The aggregate audit fees billed by our independent registered accountant for the years ended December 31, 2013 and December 31, 2014 were $22,650 and $29,843 respectively. There were no non-audit audit- related fees, tax fees or other fees paid to our independent registered accountant in the last two fiscal years.

 

Since the Board of Directors does not have an audit committee, the principal auditor is engaged by the Chief Executive Officer and the Chief Financial Officer on behalf of the Company’s Board of Directors.

 

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

1.

Financial Statements

 

The information concerning Ironstone financial statements and the Report of Burr Pilger Mayer, Inc., Ironstone’s independent auditors required by this item are incorporated by reference herein to the section of this Report in Item 8, entitle “Financial Statements and Supplementary Data”

 

2.

Financial Statement Schedules

 

None

 

3.

Exhibits

 

The following Exhibits are filed as part of, or incorporated by reference into, this Report.

 

Exhibit                                                            

Number          Description

 

21.1          Subsidiaries of Ironstone Group, Inc.                                   

31.1          Section 302 - Principal Executive Officer Certification          

31.2          Section 302 - Principal Financial Officer Certification

32.1          Section 1350 – Certification – Chief Executive Officer

32.2          Section 1350 – Certification – Chief Financial Officer

101.INS*XBRL Instance Document.                         

101.SCH*XBRL Taxonomy Extension Schema Document.

101 CAL*XBRL Taxonomy Extension Calculation Linkbase Document.

101 DEF*XBRL Taxonomy Extension Definition Linkbase Document .

101 LAB*XBRL Taxonomy Extension Label Linkbase Document.

101 PRE*XBRL Taxonomy Extension Presentation Linkbase Document.

  

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

		IRONSTONE GROUP, INC. a Delaware corporation
Date:     April 15, 2015	By: /s/ William R. Hambrecht
		William R. Hambrecht Chief Executive Officer
Date:     April 15, 2015	By: /s/ Eugene Yates
		Eugene Yates Chief Financial Officer

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

 

Signature	Title	Date
/s/ William R. Hambrecht	Director, Chief Executive Officer,	April 15, 2015
William R. Hambrecht	(Principal Executive Officer)
/s/ Eugene Yates	Chief Financial Officer,	April 15, 2015
Eugene Yates	(Principal Financial Officer)
/s/ Denis T. Rice	Director	April 15, 2015
Denis T. Rice
/s/ Robert H. Hambrecht	Director	April 15, 2015
Robert H. Hambrecht
/s/ Elizabeth Hambrecht	Director	April 15, 2015
Elizabeth Hambrecht
/s/ Thomas Thurston	Director	April 15, 2015
Thomas Thurston

 

 

30

 

EXHIBIT 21.1

 

 

SUBSIDIARIES OF IRONSTONE GROUP, INC.

 

 

 

AcadiEnergy, Inc., a Delaware corporation, is a 100%-owned subsidiary of the Company.

 

Belt Perry Associates, Inc., an Arizona corporation, (“BPA”) is a 100%-owned subsidiary of the Company.

 

Belt Perry Associates, Inc., a California corporation, is 83.33% owned by BPA and 16.67% owned by the Company.

 

DeMoss Corporation, a California corporation, is a 100%-owned subsidiary of the Company.

 

TaxNet, Inc., an Arizona corporation, is a 100%-owned subsidiary of BPA.

 

 

EXHIBIT 31.1

 

Certification

 

 

I, William R. Hambrecht, certify that:

 

1.       I have reviewed this annual report on Form 10-K of Ironstone Group, Inc. for the year ended December 31, 2014;

 

2.                       Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.                       Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

 

4.                       The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Securities Exchange Act of 1934, as amended, Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

a)

designed such disclosure controls and procedures, or cause such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

evaluated the effectiveness of the registrant’s disclosure controls and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting  ; and

 

5.                       The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the registrant’s board of directors (or persons performing the equivalent function):

 

a)

all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

6.                       The registrant has indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:	April 15, 2015		/s/ William R. Hambrecht
			William R. Hambrecht Chief Executive Officer

 

EXHIBIT 31.2

 

Certification

 

 

I, Eugene Yates, certify that:

 

1.       I have reviewed this annual report on Form 10-K of Ironstone Group, Inc. for the year ended December 31, 2014;

 

2.                       Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.                       Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

 

4.                       The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Securities Exchange Act of 1934, as amended, Rules 13a-15(f) and 15d-15(f) for the registrant and have:

  

a)

designed such disclosure controls and procedures, or cause such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

 

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

evaluated the effectiveness of the registrant’s disclosure controls and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting  ; and

 

5.                       The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the registrant’s board of directors (or persons performing the equivalent function):

 

a)

all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

6.                       The registrant has indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:	April 15, 2015		/s/ Eugene Yates
			Eugene Yates Chief Financial Officer

 

EXHIBIT 32.1

 

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Annual Report of Ironstone Group, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

Date:     April 15, 2015

/s/ William R. Hambrecht Name: William R. Hambrecht Title: Chief Executive Officer

                       

 

 

A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Ironstone Group, Inc. and will be retained by Ironstone Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

EXHIBIT 32.2

 

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Annual Report of Ironstone Group, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

Date:     April 15, 2015

/s/ Eugene Yates Name: Eugene Yates Title: Chief Financial Officer

 

 

 

A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Ironstone Group, Inc. and will be retained by Ironstone Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.